Thanks to Dave Wheeler for this article (expanded from a Facebook post) He is an ATP pilot with ASEL, AMEL, and SES. He holds all of the CFI certificates and ratings for airplane, and instrument. He also has the gold seal attached to the CFI certificate and is a four-time Master CFI. Total time is just a bit north of 14,000 hours with just short of 12,000 as CFI. Dave has owned three different flight schools throughout the years, buying the first one in 1978, a Grumman Pilot Center. As aside, Dave got his ATP just to go through the process, as he never wanted to fly for the airlines.
When you acquire that precious initial CFI certificate you are not only approved to teach flying, you have become a “business” (allowed to legally collect money for your services) and there are new “privileges and responsibilities” far beyond just flying. Here are a few pointers for the new CFI who is putting out their shingle to offer flight lessons to the public for the first time (as opposed to teaching for an established flight school). This is a new adventure that requires some training and information to succeed (and avoid economic peril) “Going into business” is a great adventure and a learning experience that demands new skills and responsibilities and involves much more than just being a great CFI.
Among the many surprises and “learning opportunities” is business licensing. Where I teach, you will need a state business license, as the state collects sales tax. To collect the tax, the tracking vehicle is the business license number. So, we must collect the tax from the customer and pass it through to the state. Here it is call Business and Occupation tax, or B&O. Depending on your business it may be collected monthly or quarterly. The state decides that for you based upon your application, and the dollar amount you specified as anticipated income. Then, depending on where you live there may be county and/or city taxes too. Here (by the way, “here” in my case is Washington State) the state collects both city and county tax and forwards it to the respective agency. Then there are other taxes that you pay to the state for whatever reason.
Once you are licensed, be sure to check with the airport upon which you desire to teach. More and more airports are adopting a Minimum Standards Document that spells out what you need to do to conduct business on their soil. In my case, I started out with one airplane and just me. I was listed as a freelance CFI (and it applies to A&Ps too) and needed to prove airworthiness of the Cherokee 140 I was going to use, and prove that it met their insurance requirements. I was going to be a “Through the fence” operator, so I convinced them that my office would be my motorhome that I would park outside next to my tie-down spot.
As a funny example of what you can learn, I got one of those big green signs from Sporty’s that says “Learn to Fly Here” and hung it out to attract business. Little did I know that there was a separate “Sign Requirements” document with which needed to comply. Sign came down. Once the state and airport are happy, you need to think about a business plan. How are you going to run your business?
Since you are now competing for customers with any inside the fence FBOs (and they are not going to be happy with since you are “poaching” their customers) and other businesses that are going after the customer’s hard earned dollars. If you think about it, you are in competition for recreational dollars with the local golf course, dive shop, and bowling alley, the movie theater, etc. The product you are selling is not so much flying but also “challenge and adventure”. So this is where you may want to look to hire some professionals to assist in your marketing and business plan. Like many unfortunate others, I did not take this route, but learned the hard way through the school of hard knocks. Though a professional, aviation-savvy CPA and attorney may cost some money, you save from the pain and heartache that every misstep costs. Their professional fees (like yours) are worth every penny. In my case, I was going along fat dumb and happy, selling flight instruction, building my business, paying my taxes, and several years into the business I got a nice letter from the state department of revenue saying they wanted to do a B&O tax audit. I called one of my customers, a CPA and asked his advice and his first sentence was “Do NOT let anyone from that office onto your property!” Wow, OK. Why? He explained that they will not only audit your books, but your premises as well. He said that if they see a magazine lying on your table they will want to see where you paid the tax on the magazine. If you buy something for “resale” meaning you will pay the tax when you sell it, not when you buy it, they will want to see that paper trail.
Just like every other emergency in aviation, where the test comes first and the lesson and learning follow, I got smart quick. I put the CPA on retainer, and took my records to the CPA’s office and they did the audit there. They actually found that I had paid too much sales tax on a computer that I purchased out of state and I ultimately got a refund. Not enough to pay the CPA, but still…worth it and “lesson learned” (hire a professional!) Getting really comprehensive and “CFI specific” insurance from a professional (like SAFE offers) is another essential first step in business. Though you may not have assets to worry about starting out, all your future earnings are also be legally attached so professional CFI insurance is money well spent!
That is enough for today, but in a future issue, I’ll talk about some of the other things you will face as a freelance CFI.
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